Economic news sounds a bit contradictory lately— especially when more and more Americans feel the economy is on the “wrong track,” but they’re not worried about losing their jobs.
According to the latest home purchase sentiment index from the Federal National Mortgage Association—known as Fannie Mae—78% of respondents believe the economy is on the “wrong track” and overwhelmingly blame inflation. The negative sentiment ticked up 7 percentage points from last month.
Despite the gloom, 78% of Americans are confident they won’t lose their jobs over the next 12 months, up from 75% the previous month.
“[C]onsumers are fed up with the high prices of many goods and services,” said Fannie Mae’s chief economist Doug Duncan.
“Although the labor market is strong and wages have risen in the past year, consumers may believe that their purchasing power has not kept up with prices, as 69% of consumers say their incomes are ‘about the same’ compared to the previous year,” he added.
But it should also be noted that the survey found that the net share of those who say their household income is significantly higher than it was 12 months ago increased 5 percentage points month over month.
Home buyers and owners don’t align
The Federal Reserve’s higher-for-longer stance isn’t helping homeowners and buyers, as survey respondents aren’t convinced they’ll see their mortgage rates lower anytime over the next 12 months. Homebuyers are also saying that high home prices—despite median prices dropping in September—are driving their pessimism, with 85% of respondents saying that it’s a bad time to buy a home.
But sellers feel differently: 63% of homeowners still feel pretty good about selling their homes in this environment, unchanged from the previous month.
Think tank, The Conference Board, sees a similar story.
“Consumers are feeling better off and worse financially at the same time,” said Justyna Zabinska-La Monica, a senior manager at the Conference Board, who tracks business cycle indicators.
Homeowners have built considerable equity during the pandemic when housing prices rose, and that’s why they’re feeling richer. However, the want-to-be homeowners who have seen inflation eat away their wages along with the rising home prices are feeling the pinch, Zabinska-La Monica explained.
Dan Pazar, executive vice president at Taiko, an investment firm with $15 billion assets under advisement, said sellers might be thinking their home price is reaching the peak, and it will only come down.
And with the expectation of higher-for-longer interest rates pressuring mortgage rates upwards, sellers will find it hard to find a buyer in that environment, said Pazar.
“If you are in a rational market, selling an appreciated home, have seen your income grow with job security, you could probably support a higher rate, and if rates come down, you may just refi[nance] that in the future all assuming you don’t get outbid by a cash offer,” Pazar added.
“Conclusion is that people are feeling different based on what their individual situation is, but all are having on the top of their list to worry about inflation and less purchasing power of their income,” said Zabinska-La Monica.